Corporate Shrink
from Winter 1999
In 1997, when Tom Stephens took the helm of MacMillan Bloedel, a troubled Vancouver logging company, he stunned everybody by walking into a summit of directors and top managers with a psychologist. “A lot of jaws dropped when he introduced me,” says Robert Chapman. “Not too many CEOs walk around with their shrinks.”
Although he has a Ph.D. in psychology, Chapman, 53, is actually a management consultant, albeit one whose specialty is unusual: He helps directors and CEOs talk to—and listen to—each other and to their employees. “I worked with disturbed children in the late ’70s, so working with senior executives was a kind of natural step,” quips Chapman, a partner in King, Chapman & Broussard of Houston.
Chapman’s corporate patients have included AT&T, Ford, and Manville Corp. According to Stephens, “Bob helped us to get around personal and private agendas and to focus on the real issues, which saved us a lot of time and reduced conflicts.”
The treatments he has prescribed have ranged from bringing a lumberjack into a board meeting to telling a CEO to literally speak up—it turned out one director wasn’t getting the CEO’s message because he was hard of hearing. In an interview with Corporate Board Member, Dr. Bob discusses how he’s helped his patients communicate with each other on just about everything.
Why are you usually called in?
Sometimes the CEO makes the call, as Tom Stephens did. But in most cases the CEO is the problem. He’s played all his cards and the results aren’t there. So the call comes from a director, usually a seasoned director who’s heard the excuses before and sees what’s coming. Tom likes to talk about the bell cow. That’s the lead cow that the other cows follow. It’s the bell cow who brings me in.
The first thing I’ll do is listen to the directors’ concerns and criticisms. Because the most important thing, I find, is giving the members of a board the sense that someone is hearing them. It’s frustrating when they don’t think their CEO is listening. And usually, he’s not.
I mean, you’re a director, and you go to this meeting knowing you don’t have confidence in the CEO or his team. Chances are, the CEO has a track record of making bad decisions, and he probably hasn’t been straight with the board about the decisions you’re being asked to make. Either he didn’t tell you the whole story when you voted on it to begin with, or he didn’t tell you when it started going south, when the company got so far under water that nothing could be done about it. And now you, as a director, have to make another decision. So what are you going to do? You don’t want to make any more bad calls, so it’s likely you’re not going to make any decision at all. It’s impossible to run a company like that.
After I’ve met the directors, I’ll capture in writing what I’ve been told and look for the conflict in the point of view. It’s usually around some change that’s creating an earthquake—like the company’s stock is lagging, or it just made an acquisition it shouldn’t have. When I’m finally ready to give feedback to the CEO, I’ll say, “OK, I’ve had a chance to sit down with some of your directors, and here’s the essence of why they’re unhappy: (a) you’re not listening and (b) they have a different point of view than you on this issue.”
Why even bother if the CEO has played out his hand?
Because it may be good news if he’s played it out and knows it. One of the things that gets in the way of leadership is having all the answers. You don’t want your CEO saying, “I’m the boss, so don’t use that thing between your ears. Just do it my way.” It’s a terrific sign if a CEO can admit, “I think I’m facing something here that I have never done before, and I need to be surrounded by smart people to help me think it through.”
What took you to Canada?
Tom Stephens had just taken over as CEO of MacMillan Bloedel (now part of Weyerhaeuser), which was under tremendous pressure from analysts. One director managed some investments for the Bass brothers, who’d bought a lot of stock and were looking for a turnaround. MB was an old industrial lumber company, but it had just moved into a new building in Vancouver where the CEO had an office that was three stories high, with a patio overlooking the bay. But while the executives were living very well, they were destroying shareholder value left and right. And the company was cutting lumber in a place with the most extensive green laws in Canada, and the environmentalists were after them. On top of that, British Columbia has some of the most-strained labor/ management relationships in Canada, and this company was no exception.
What did you do to improve things?
Before Tom ever set foot into the new job, we put together a council of external advisers—investment bankers, strategists, communications people. My firm provided leadership and organizational consultants. On his first day, I went with Tom to a meeting with his top managers and it was ugly. He told them, “Guys, you’ve been here 10 years, and you’ve been part of destroying a lot of value here. I’m going to give you a chance, because you know a lot about this company. But if you’re not going to change the way you perform, you’re not going to stick.” Some of them didn’t last two days. He was just as frank at board meetings.
How did you help the company get along better with its labor force?
The mistake most companies make is to go to work on labor relationships, which invariably leads to contract problems. We had Tom focus on business results instead. MB had cut a ton of trees, but the high costs of running the mills made it too expensive to process the lumber. Tom figured out how much he needed to save on costs to reopen a mill that had been put in mothballs. We had workers and managers figure out where to find the savings, which they did.
We invited the union leader and his partner from management to bring their plan to a board meeting in Vancouver. The directors were stunned at how the two sides had not only come to terms, but had solved the problem. A couple of months later, we invited a logger to talk to the directors. He started out saying, “I’m your worst nightmare. My whole life, I’ve been fighting this company and trying to ding you every chance I get.” But then he talked about how excited he was to be a part of the changes going on. And the directors started applauding.
A lot of times, boards get presentations from managers who are very secretive. But smart directors want to meet the people who are on the front lines. Bad things happen when you isolate people. But when you include everyone in one conversation—from the director to the guy doing the implementing—magic things happen.
What did you do to persuade the environmentalists and the company to start talking to each other?
Greenpeace had been attacking the company for clear-cutting the rain forests in British Columbia. Its members were picketing the ships that brought our products into Europe, attacking us where the customer was. The company had spent a lot of time convincing itself that Greenpeace was full of communists. This was nonsense, and Tom didn’t need any pushing from us to recognize that. He said that if he had told his 16-year-old daughter that the place he was running was clear-cutting rain forests, she would have disowned him. These environ-mentalists weren’t crazies, and our social license depended on their approval. Tom invited a Greenpeace official into his office for coffee, and that sent a signal that we knew we’d lost the war on clear-cutting.
What do you do with a board that has lost its way, or is squabbling?
You’d be surprised how easy it is for directors to get distracted. These are busy executives running their own companies. They may know their industries, but they don’t really know yours. Some of them are used-to-bes who can’t keep up. My job is to get everyone focused on an outcome. A lot of the work we do is to help people listen so that they can talk in a much more useful way.
Have you had any failures?
I consulted for a company in a big city in the Midwest, a bank holding company. Every month its board would spend about an hour dealing with 59 of the 60 banks it held and another five or six hours on the one bank in the town where they lived. They’d sort through loan decisions, who bounced checks, all this kind of stuff. They were acting like managers of the lead bank. But they weren’t bankers to begin with, so they really didn’t understand the business. My sense was that they were destroying shareholder value month after month after month.
In that case, I was brought in by the chairman. I made a recommendation that forced the directors to confront their meddling. And after a really intensive two-day retreat, they got it all sorted out. But when I came back the next week, figuring we’d get started implementing all this stuff, the CEO just looked at me and said, in so many words, “I have no intention of doing any of this.” He lasted two more years and the company was gone in three. It kept buying banks and diluting the value of the bank’s shares until a big fish came along and took it out.
Sometimes, you just can’t help a bad client.
